A Property Underwriting is where an Underwriter enters into a confidential and binding agreement with a Seller to acquire an asset (or portfolio of assets) at a fixed price on a agreed future date. During the intervening period, the interests of the Underwriter and the Seller are aligned as they work together to maximise the value of the asset(s) through a strategic disposal process.
Assets can be offered by private treaty or auction, and any additional costs of sale incurred over and above a typical market sale will be shared between the parties (i.e. any fees payable on the overage). If an individual asset can be sold for a price in excess of its underwritten value within the agreed timescale then any overage/upside is shared between the Seller and the Underwriter. However, if a buyer cannot be found at a higher price than the underwritten value, or if the Buyer fails to perform in time, then Underwriter will acquire the property (or remaining properties) at the underwritten price.
The benefits of property underwriting to a seller are:
- Guaranteed sale and receipt of funds within a pre-determined timescale;
- Alignment of interest with the Underwriter to maximise sales proceeds, and hence a sharing of resources with which to achieve this;
- A retained interest in the sale with additional capital upside in the event that the asset(s) are sold in excess of the underwritten price;
- The ability to lock into a minimum price early in the sales process, and hence secure protection from market volatility during the marketing period;
- Where underwriting multiple assets the potential to unlock full value from individual asset sales whilst retaining certainty of a portfolio exit.
Property underwritings can be put in place from a matter of hours to many months in advance of sale, with simple and cost effective legal structuring meaning that the cost of sale is not materially different to any other form transaction. It offers an effective and inexpensive solution to the illiquidity issues which plague property investments during times of market volatility and uncertainty.
Our Underwriting Funds
Since inception in late 2009, C2 Capital has successfully launched two FCA authorised regulated collective investment partnerships specialising in underwriting commercial property investments with assets of c.£50m.
C2 Capital Fund One was launched in February 2010 with £5.6m of equity commitments and invested £13.2m in 9 properties by way of underwriting and investment, generating investors consistent 10% per annum returns over a 6 year timeframe.
C2 Capital Two was launched in September 2012 with £13.5m of equity commitments and has invested over £33m in 27 assets by way of underwriting and investment. The Fund is still investing, but current forecasts and realised returns on exited investments predict that it is on course to deliver target returns of 15% per annum.
So far as we are aware, C2 Capital operates the only dedicated underwriting investment vehicle in the UK, and benefits from a strong market reputation built upon a track record of performance and deliverability. We would be delighted to hear of any situations where an underwritten sale would be of interest, and will happily pay brokerage fees where applicable.